Ex parte GST order passed without proper SCN service or hearing is invalid,

Ex parte GST order passed without proper SCN service or hearing is invalid, and the order itself is to be treated as notice for objections.

Issue:

Whether an ex parte order passed by the Assessing Officer (AO) under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017), fastening tax liability, interest, and penalty, is valid if the show cause notice (SCN) was never brought to the assessee’s knowledge or physically served, and the assessee only became aware of the proceedings when the order was uploaded under a non-standard tab on the dashboard.

Facts:

• The Assessing Officer (AO) passed an order under Section 74 of the CGST/UPGST Act, 2017, imposing tax, interest, and penalty liability on the assessee.
• The assessee contended that this order was “absolutely ex parte” because:
  1. The alleged show cause notice (SCN) was never brought to their knowledge.
  2. Physical service of the SCN was never effected upon them.
• The assessee stated that they only gained knowledge of the proceedings and the order when it was uploaded on the dashboard under the tab ‘view additional notices and orders’ (implying a similar issue to previous cases where notices were uploaded on non-standard tabs).

Decision:

The court held in favor of the assessee. It strongly emphasized the principle that “Nobody should be condemned unheard,” and that the legislature, by incorporating provisions for notice/show cause notice, intended to ensure this. The court reiterated that provisions under tax statutes must be strictly construed, and prerequisites like the opportunity of oral hearing before passing a final order must be complied with. The authority cannot assume that provisions for personal hearing are mere empty formalities or that a representation to a notice would suffice. Therefore, the order of the Assessing Officer was to be set aside and treated as a notice itself, enabling the assessee to file objections and place documents for consideration.

Key Takeaways:

• Fundamental Rule of Natural Justice: Audi Alteram Partem: The core of this judgment is the inviolable principle that no person should be condemned unheard. This means the assessee must be given proper notice of the allegations and a fair opportunity to present their defense, both in writing and, if requested or warranted, through a personal hearing.
• Strict Construction of Tax Statutes (Procedural Compliance): The court stressed that procedural provisions in tax statutes, especially those related to issuing notices and affording hearings, must be strictly complied with by the authorities. They are not optional formalities.
• Effective Service of Notice: Merely uploading a notice on a portal, especially in a less obvious tab, without ensuring effective communication or knowledge to the assessee, does not constitute valid service. The assessee’s claim of non-knowledge due to such uploading was accepted.
• Personal Hearing is Not an “Empty Formality”: The court firmly rejected the notion that a personal hearing is a mere formality. It underscored that tax authorities cannot take it for granted that a written representation alone is sufficient, especially when the assessee requests or deserves an oral hearing.
• Ex Parte Order is Invalid: An order passed without fulfilling the fundamental requirement of proper notice and opportunity to be heard is procedurally invalid and cannot be sustained.
• Remedy: Treating Order as Notice and Remand: Instead of outright quashing, the court adopted a practical remedy: treating the flawed demand order as a fresh show cause notice. This allows the department to proceed afresh while ensuring the assessee gets their rightful opportunity to respond and be heard, thereby upholding both natural justice and the ultimate goal of determining the correct tax liability. This approach is sometimes preferred to avoid completely nullifying proceedings if the assessee’s non-participation was due to a genuine lack of knowledge.